How $IWM bears turned quick gains

Option traders doubled their money on downside positions in the iShares Russell 2000 Fund at the end of last week.

Last Thursday, Investitute’s proprietary programs cited the purchase of 10,750 April $142 puts for $2.55 with shares at $149.51. This was clearly a new position, as open interest in the strike was only 2,072 contracts before the session began. Investitute co-founder Pete Najarian noted the aggressive activity at that time on CNBC’s “Halftime Report.”

Those puts traded for $6.01 Friday, more than doubling their purchase price overnight. The stock dropped 5% at the same time, a large move for the index but still far less than that of its options on a relative basis.

Long puts lock in the price where a stock can be sold no matter how far it might drop, gaining value in a selloff with the potential for significant leverage. The contracts can be purchased either as an outright bearish bet or a hedge on a long-stock position.

IWM fell to a new year-to-date low of $142.50 Friday afternoon before bouncing at the end of that session and rose 0.89% today to close at $148.08. The exchange-traded fund, which tracks the small-cap Russell 2000 Index, had been declining with the broader market for the last several sessions.